Suppose in the market for iPhones, the following two changes take place: (1) the cost of making iPhones falls, and (2) the price of smartphone data plans falls. What happens to the equilibrium price and the equilibrium quantity?

Question

Quizplus · Accepted Answer

The cost of making iPhones falling leads to a supply increase (shifting the supply curve to the right), which would normally lower the price and increase the quantity. The fall in the price of smartphone data plans increases demand for iPhones (shifting the demand curve to the right), which would normally increase both the price and quantity. The combined effect is indeterminate on price because one effect pushes price down while the other pushes it up, but both effects clearly increase the equilibrium quantity.

Suppose in the Market for IPhones, the Following Two Changes